UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

OR

(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 1-10308

Avis Budget Group, Inc.

Delaware (State or other jurisdiction of incorporation or organization)		06-0918165 (I.R.S. Employer Identification Number)

6 Sylvan Way Parsippany, NJ (Address of principal executive offices)		07054 (Zip Code)

(973) 496-4700
(Registrant’s telephone number, including area code)

Cendant Corporation, 9 West 57^th Street, New York, NY 10019
(Former name and address)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes [X]         No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x	Accelerated filer o	Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes [  ]         No [X]

The number of shares outstanding of the issuer’s common stock was 100,869,415 shares as of September 30, 2006.

 

 

Table of Contents

				Page
PART I		Financial Information			3
Item 1.		Financial Statements			3
		Consolidated Condensed Statements of Operations for the Three and Nine Months Ended September 30, 2006 and 2005 (restated for the nine months ended September 30, 2005)			3
		Consolidated Condensed Balance Sheets as of September 30, 2006 and December 31, 2005 (restated as of December 31, 2005)			4
		Consolidated Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2006 and 2005 (restated for the nine months ended September 30, 2005)			5
		Consolidated Condensed Statement of Stockholders’ Equity for the Nine Months Ended September 30, 2006 (restated as of January 1, 2006)			7
		Notes to Consolidated Condensed Financial Statements			8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			24
Item 3.		Quantitative and Qualitative Disclosures about Market Risks			34
Item 4.		Controls and Procedures			35
PART II		Other Information			35
Item 1.		Legal Proceedings			35
Item 1A.		Risk Factors			37
Item 4.		Submission of Matters to a Vote of Security Holders			38
Item 5.		Other Information			39
Item 6.		Exhibits			39
		Signatures			40
EX-12: STATEMENT RE: COMPUTATION OF RATIO
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

FORWARD-LOOKING STATEMENTS

The forward-looking statements contained herein are subject to known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These forward-looking statements are based on various facts and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Forward-looking statements include the information concerning our future financial performance, business strategy, projected plans and objectives. Statements preceded by, followed by or that otherwise include the words “believes”, “expects”, “anticipates”, “intends”, “projects”, “estimates”, “plans”, “may increase”, “may fluctuate” and similar expressions or future or conditional verbs such as “will”, “should”, “would”, “may” and “could” are generally forward-looking in nature and not historical facts. You should understand that the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in such forward-looking statements:

	•	the high level of competition in the vehicle rental industry;
	•	an increase in the cost of new vehicles;
	•	a decrease in our ability to acquire or dispose of cars through repurchase programs;
	•	a decline in the results of operations or financial condition of the manufacturers of our cars;
	•	a downturn in airline passenger traffic in the United States or in the other international locations in which we operate;
	•	an occurrence or threat of terrorism, pandemic disease, natural disasters or military conflict in the markets in which we operate;
	•	our dependence on third-party distribution channels;
	•	a disruption or decline in rental activity, particularly during our peak season or in key market segments;
	•	a disruption in our ability to obtain financing for our operations, including the funding of our vehicle fleet via the asset-backed securities and lending market;
	•	a significant increase in interest rates or in borrowing costs;
	•	a substantial increase in fuel costs;
	•	a major disruption in our communication or centralized information networks;
	•	our failure or inability to comply with regulations or any changes in regulations;
	•	our failure or inability to make the changes necessary to operate effectively now that we operate independently from the former real estate, hospitality and travel distribution businesses following the separation of those businesses from us during third quarter 2006, when we were known as Cendant Corporation;
	•	other business, economic, competitive, governmental, regulatory, political or technological factors affecting our operations, pricing or services;
	•	risks inherent in the restructuring of the operations of Budget Truck Rental and our ability to estimate the amount and timing of the charge we expect to record in the fourth quarter; and
	•	the receipt of additional information from our former PHH subsidiary that is inconsistent with the information received to date.

In addition, you should understand that the following important factors and assumptions could affect our future results and could cause actual results to differ materially from those expressed in our forward-looking statements:

	•		risks inherent in the separation and related transactions, including risks related to our new borrowings, and costs of the separation; and
	•		the terms of agreements among the separated companies, including the allocations of assets and liabilities, including contingent liabilities and guarantees, commercial arrangements and the performance of each of the separated companies’ obligations under these agreements;

Other factors and assumptions not identified above, including those described under “Risk Factors” set forth in our 2005 Annual Report on Form 10-K, as modified by our Quarterly Reports on Form 10-Q for the periods ended March 31, 2006, June 30, 2006 and September 30, 2006, were also involved in the derivation of these forward-looking statements, and the failure of such other assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. Most of these factors are difficult to predict accurately and are generally beyond our control.

You should consider the areas of risk described above, as well as those described under “Risk Factors” set forth in our Form 10-K and Forms 10-Q referred to above, in connection with any forward-looking statements that may be made by us and our businesses generally. Except for our ongoing obligations to disclose material information under the federal securities laws, we undertake no obligation to release any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events unless required by law.

As discussed in Item 1A “Risk Factors” and Item 5 “Other Information,” we intend to restate our 2005, 2004 and 2003 financial statements by amending our 2005 Form 10-K as soon as practicable.

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements

Avis Budget Group, Inc.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
														2005
		2006				2005				2006				(Restated)
Revenues
Vehicle rental		$	1,253			$	1,242			$	3,469			$	3,244
Other			313				305				889				831
Net revenues			1,566				1,547				4,358				4,075
Expenses
Operating			823				744				2,204				1,987
Vehicle depreciation and lease charges, net			383				341				1,077				899
Selling, general and administrative			179				275				670				738
Vehicle interest, net			87				87				253				227
Non-vehicle related depreciation and amortization			25				31				81				87
Interest expense related to corporate debt, net:
Interest expense			50				61				206				106
Early extinguishment of debt			313				—				313				—
Separation costs			167				—				223				—
Restructuring charges			—				—				—				26
Total expenses			2,027				1,539				5,027				4,070
Income (loss) before income taxes			(461	)			8				(669	)			5
Provision (benefit) for income taxes			(136	)			5				(214	)			7
Income (loss) from continuing operations			(325	)			3				(455	)			(2	)
Income (loss) from discontinued operations, net of tax			(54	)			493				478				1,119
Gain (loss) on disposal of discontinued operations, net of tax			(634	)			3				(1,956	)			(35	)
Income (loss) before cumulative effect of accounting changes			(1,013	)			499				(1,933	)			1,082
Cumulative effect of accounting changes, net of tax			—				—				(64	)			—
Net income (loss)		$	(1,013	)		$	499			$	(1,997	)		$	1,082
Earnings (loss) per share
Basic
Income (loss) from continuing operations		$	(3.23	)		$	0.03			$	(4.53	)		$	(0.02	)
Net income (loss)			(10.07	)			4.81				(19.88	)			10.33
Diluted
Income (loss) from continuing operations		$	(3.23	)		$	0.03			$	(4.53	)		$	(0.02	)
Net income (loss)			(10.07	)			4.72				(19.88	)			10.33

See Notes to Consolidated Condensed Financial Statements.

Avis Budget Group, Inc.

						December 31,
		September 30,				2005
		2006				(Restated)
Assets
Current assets:
Cash and cash equivalents		$	379			$	546
Restricted cash			15				15
Receivables, net			453				348
Deferred income taxes			57				375
Assets of discontinued operations			—				20,512
Other current assets			1,201				219
Total current assets			2,105				22,015
Property and equipment, net			474				516
Deferred income taxes			180				260
Goodwill			2,194				2,188
Other intangibles, net			742				731
Other non-current assets			213				283
Total assets exclusive of assets under vehicle programs			5,908				25,993
Assets under vehicle programs:
Program cash			9				15
Vehicles, net			7,535				7,509
Receivables from vehicle manufacturers and other			431				602
Investment in Avis Budget Rental Car Funding (AESOP) LLC — related party			362				374
			8,337				8,500
Total assets		$	14,245			$	34,493
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other current liabilities		$	1,974			$	2,287
Current portion of long-term debt			32				975
Liabilities of discontinued operations			—				7,263
Total current liabilities			2,006				10,525
Long-term debt			1,834				2,533
Other non-current liabilities			513				831
Total liabilities exclusive of liabilities under vehicle programs			4,353				13,889
Liabilities under vehicle programs:
Debt			1,006				952
Debt due to Avis Budget Rental Car Funding (AESOP) LLC—related party			5,057				6,957
Deferred income taxes			1,171				1,139
Other			127				214
			7,361				9,262
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $.01 par value—authorized 1 million shares; none issued and outstanding
Common stock, $.01 par value—authorized 250 million shares; issued 135,363,084 and 135,085,222 shares			14				14
Additional paid-in capital			10,065				12,009
Retained earnings (deficit)			(890	)			5,997
Accumulated other comprehensive income			58				40
Treasury stock, at cost—34,368,712 and 33,924,621 shares			(6,716	)			(6,718	)
Total stockholders’ equity			2,531				11,342
Total liabilities and stockholders’ equity		$	14,245			$	34,493

See Notes to Consolidated Condensed Financial Statements.

Avis Budget Group, Inc.

		Nine Months Ended
		September 30,
						2005
		2006				(Restated)
Operating Activities
Net income (loss)		$	(1,997	)		$	1,082
Adjustments to arrive at income from continuing operations			1,542				(1,084	)
Loss from continuing operations			(455	)			(2	)
Adjustments to reconcile income from continuing operations to net cash provided by operating activities exclusive of management programs:
Non-vehicle related depreciation and amortization			81				87
Net change in assets and liabilities, excluding the impact of acquisitions and dispositions:
Receivables			(36	)			(20	)
Income taxes and deferred income taxes			(455	)			(94	)
Accounts payable and other current liabilities			(60	)			(206	)
Other, net			(83	)			85
Net cash used in operating activities exclusive of vehicle programs			(1,008	)			(150	)
Vehicle programs:
Vehicle depreciation			1,027				863
Net cash provided by operating activities			19				713
Investing Activities
Property and equipment additions			(64	)			(65	)
Net assets acquired, net of cash acquired, and acquisition-related payments			(116	)			(105	)
Proceeds received on asset sales			16				39
Proceeds from sale of available-for-sale securities			—				18
Proceeds from dispositions of businesses, net of transaction-related payments			4,035				969
Other, net			6				65
Net cash provided by investing activities exclusive of vehicle programs			3,877				921
Vehicle programs:
Increase (decrease) in program cash			8				(4	)
Investment in vehicles			(9,249	)			(8,413	)
Payments received on investment in vehicles			8,224				6,143
Other, net			(12	)			(22	)
			(1,029	)			(2,296	)
Net cash provided by (used in) investing activities			2,848				(1,375	)

Avis Budget Group, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(In millions)

		Nine Months Ended
		September 30,
						2005
		2006				(Restated)
Financing Activities
Proceeds from borrowings			1,875				27
Principal payments on borrowings			(3,580	)			(30	)
Net short-term borrowings			—				450
Issuances of common stock			43				228
Repurchases of common stock			(243	)			(1,018	)
Payment of dividends			(113	)			(309	)
Other, net			(39	)			9
Net cash used in financing activities exclusive of vehicle programs			(2,057	)			(643	)
Vehicle programs:
Proceeds from borrowings			8,521				7,703
Principal payments on borrowings			(10,487	)			(6,469	)
Net change in short-term borrowings			133				128
Other, net			(13	)			(15	)
			(1,846	)			1,347
Net cash provided by (used in) financing activities			(3,903	)			704
Effect of changes in exchange rates on cash and cash equivalents			(1	)			(1	)
Cash provided by (used in) discontinued operations (Revised— See Note 1)
Operating activities			463				2,060
Investing activities			(742	)			(2,368	)
Financing activities			1,137				186
Effect of exchange rate changes			12				(44	)
			870				(166	)
Net decrease in cash and cash equivalents			(167	)			(125	)
Cash and cash equivalents, beginning of period			546				163
Cash and cash equivalents, end of period		$	379			$	38

See Notes to Consolidated Condensed Financial Statements.

Avis Budget Group, Inc.

																		Accumulated
										Additional				Retained				Other				Treasury								Total
		Common Stock								Paid-in				Earnings				Comprehensive				Stock								Stockholders’
		Shares				Amount				Capital				(Deficit)				Income				Shares				Amount				Equity
Balance at December 31, 2005 (Restated)			135.1			$	14			$	12,009			$	5,997			$	40				(33.9	)		$	(6,718	)		$	11,342
Comprehensive loss:
Net loss			—				—				—				(1,997	)			—				—				—
Currency translation adjustment, net of tax of $(16)			—				—				—				—				202				—				—
Unrealized gains on cash flow hedges, net of tax of $7			—				—				—				—				(12	)			—				—
Minimum pension liability adjustment, net of tax of $(3)			—				—				—				—				5				—				—
Total comprehensive loss																															(1,802	)
Net activity related to restricted stock units			—				—				(44	)			—				—				0.7				211				167
Exercise of stock options			0.2				—				48				—				—				0.2				31				79
Tax benefit from exercise of stock options			—				—				7				—				—				—				—				7
Repurchases of common stock			—				—				—				—				—				(1.4	)			(243	)			(243	)
Payment of dividends			—				—				—				(107	)			—				—				—				(107	)
Dividend of Realogy Corporation and Wyndham Worldwide Corporation			—				—				(1,956	)			(4,783	)			(167	)			—				—				(6,906	)
Other			0.1				—				1				—				(10	)			—				3				(6	)
Balance at September 30, 2006			135.4			$	14			$	10,065			$	(890	)		$	58				(34.4	)		$	(6,716	)		$	2,531

See Notes to Consolidated Condensed Financial Statements.

Avis Budget Group, Inc.

1.	Basis of Presentation and Recently Issued Accounting Pronouncements
	Basis of Presentation
	Avis Budget Group, Inc. provides car and truck rentals and ancillary services to businesses and consumers in the United States and internationally. The accompanying unaudited Consolidated Condensed Financial Statements include the accounts and transactions of Avis Budget Group, Inc. and its subsidiaries (“Avis Budget”), as well as entities in which Avis Budget directly or indirectly has a controlling financial interest (collectively, the “Company”).
	The Company operates in the following business segments:

	•	Domestic Car Rental—provides car rentals and ancillary products and services to business and leisure travelers in the United States.
	•	International Car Rental—provides car rentals and ancillary products and services to business and leisure travelers primarily in Canada, Puerto Rico, the U.S. Virgin Islands, Argentina, Australia and New Zealand.
	•	Truck Rental—provides truck rentals and related services to consumers and light commercial users in the United States.

	The Company adopted the above segment reporting structure as a result of a reevaluation performed subsequent to the completion of the spin-offs of Realogy Corporation (“Realogy”) and Wyndham Worldwide Corporation (“Wyndham”) and the sale of Travelport, the companies that comprised the Company’s former travel distribution businesses (“Travelport”), in third quarter 2006, each of which is discussed below.
	In connection with the completion of its separation plan, which is discussed in further detail below, the Company’s stockholders approved a change in the Company’s name from Cendant Corporation to Avis Budget Group, Inc. and a 1-for-10 reverse stock split of its common stock, each of which became effective on the New York Stock Exchange at the opening of the market on September 5, 2006, and at that time, the Company’s ticker symbol changed to “CAR.”
	In presenting the Consolidated Condensed Financial Statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgments and available information. Accordingly, actual results could differ from those estimates. In management’s opinion, the Consolidated Condensed Financial Statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. Certain reclassifications have been made to prior period amounts to conform to the current period presentation. For the nine months ended September 30, 2005, the Company has separately disclosed the operating, investing and financing portions of cash flows attributable to its discontinued operations, which in prior periods were reported on a combined basis as a single amount. These financial statements should be read in conjunction with the Company’s 2005 Annual Report on Form 10-K/A to be filed as soon as practicable.
	Discontinued Operations. On January 31, 2005, the Company completed the spin-off of its former mortgage, fleet leasing and appraisal businesses in a tax-free distribution to the Company’s stockholders of one share of PHH Corporation (“PHH”) common stock per every twenty shares of then outstanding Cendant common stock held on January 19, 2005. In February 2005, the Company completed an initial public offering of Wright Express Corporation, its former fuel card subsidiary, and in October 2005, the Company sold its former Marketing Services division, which was comprised of its individual membership and loyalty/insurance marketing businesses. Also, on July 31, 2006, the Company completed the spin-offs of Realogy and Wyndham, and on August 23, 2006, the Company completed the sale of Travelport for net proceeds of approximately $4.1 billion. The Company recorded a non-cash impairment charge of approximately $1.3 billion in second quarter 2006 to reflect the difference between Travelport’s carrying value and its estimated fair value, less costs to dispose. There was no tax benefit recorded in connection with this charge. During third quarter 2006, the

	Company also recorded a pretax loss of $137 million ($510 million, after tax) on the sale of Travelport in connection with certain transaction-specific costs and tax charges the Company could not recognize until the sale was consummated. Upon completion of the spin-off of PHH, the Company’s former mortgage business was not classified as a discontinued operation due to Realogy’s participation in a mortgage origination venture that was established with PHH in connection with the spin-off. However, due to the spin-off of Realogy on July 31, 2006, the Company no longer participates in the venture. Pursuant to Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” the account balances and activities of Wright Express, PHH, the former Marketing Services division, Realogy, Wyndham and Travelport have been segregated and reported as discontinued operations for all periods presented. Summarized financial data for the aforementioned businesses are provided in Note 2—Discontinued Operations.
	Vehicle Programs. The Company presents separately the financial data of its vehicle programs. These programs are distinct from the Company’s other activities since the assets are generally funded through the issuance of debt that is collateralized by such assets. Assets under vehicle programs are funded through borrowings under asset-backed funding or other similar arrangements. The income generated by these assets is used, in part, to repay the principal and interest associated with the debt. Cash inflows and outflows relating to the generation or acquisition of such assets and the principal debt repayment or financing of such assets are classified as activities of the Company’s vehicle programs. The Company believes it is appropriate to segregate the financial data of its vehicle programs because, ultimately, the source of repayment of such debt is the realization of such assets.
	Reverse Stock Split. In connection with the 1-for-10 reverse stock split of the Company’s common stock, all references to common share data in the accompanying Consolidated Condensed Financial Statements and notes have been revised to reflect the reverse stock split.
	Restatement and Reclassification. The Company corrected the presentation of prior year vehicle-related revenues and operating expenses to conform to the gross reporting presentation for vehicle licensing and airport concession fees, which was adopted in fourth quarter 2005 and resulted in additional revenues and operating expenses of $97 million and $262 million during the three and nine months ended September 30, 2005, respectively. Such amounts had been previously presented on a net basis. This correction had no effect on previously reported pretax income.
	Subsequent to the issuance of the Company’s 2005 financial statements, the Company became aware of errors in the methodology used to allocate purchase price, including the allocation among the three businesses acquired in the March 2001 acquisition of Avis Group Holdings, Inc., which included the Company’s current Avis car rental operations and former fleet leasing and fuel card businesses, which were disposed in first quarter 2005. The Company also concluded that the aggregation of two of the businesses acquired for purposes of testing goodwill impairment under SFAS No. 142, “Goodwill and Intangible Assets” was incorrect.
	As a result of correcting these errors, the fleet leasing business was allocated $256 million less goodwill and the fuel card business and Avis were allocated additional goodwill of $141 million and $52 million ($51 million, net of amortization in 2001), respectively. In addition, the fair value of the net assets acquired (excluding goodwill) of the fleet leasing business and Avis increased $39 million and $24 million, respectively. As a result, the total amount of goodwill recorded in the March 2001 acquisition decreased $63 million. The effects of correcting these errors occur in 2001 through 2004 (such periods are not presented herein) and first quarter 2005.
	The effects of not aggregating the fleet leasing and fuel card businesses for purposes of testing goodwill impairment and the reallocation of purchase price discussed above are (i) the recognition of impairment charges related to goodwill of the fleet leasing business of $102 million in 2003 and $100 million in 2002 (such periods are not presented herein), (ii) a decrease in the loss on disposal of PHH (which included the fleet leasing business) due to a reduction in PHH's net assets resulting from the impairment charges and reallocation of purchase price and (iii) an increase in the gain on the sale of the fuel card business.
	The net impact to earnings of recording these adjustments between the date of the acquisition of Avis Group Holdings, Inc. through the dates of disposition of the fleet and fuel card businesses is $51 million, which is reflected in the accompanying Consolidated Condensed Financial Statements as an increase to goodwill of Avis and to retained earnings as of December 31, 2005. This increase to goodwill for Avis remains on the Company’s Consolidated Condensed Balance Sheet as of September 30, 2006.
	The Company also restated income (loss) from discontinued operations for adjustments related to the operations of PHH for the period January 1, 2005 to January 31, 2005, the date the Company completed the spin-off of PHH. These adjustments primarily relate to accounting for mortgage reinsurance premiums and resulted in a decrease of $1 million in the net loss incurred by PHH from January 1, 2005 to January 31, 2005 and a corresponding increase to the loss incurred in connection with the spin-off of PHH. The net effect of the restatement is a $229 million decrease to stockholders' equity at December 31, 2004.
	The Company has concluded its review of these matters and believes that all necessary applicable material adjustments have been properly reflected in the accompanying Consolidated Condensed Financial Statements.
	In addition, the Company has restated second quarter 2006 income (loss) from disposal of discontinued operations for an error in the determination of the impairment charge related to the sale of Travelport. The effect of this correction is to recognize an additional loss of $300 million on the sale of Travelport in second quarter 2006, with a corresponding decrease in the amount recognized thereafter.

The following table presents certain of the Company’s previously reported balance sheet and income statement data, reclassifications related to the separation, revisions to such data resulting from the restatement and corresponding amounts currently reported.

		As				Effect of								As Restated
		Previously				Discontinued				Effect of				and
		Reported				Operations				Restatement				Reclassified
For the nine months ended September 30, 2005:
Income (loss) from continuing operations		$	908			$	(910	)		$	—			$	(2	)
Gain (loss) on disposal of discontinued operations, net of tax:
PHH valuation and transaction-related charges			(312	)			(180	)(b)			207				(285	)
Gain on disposal of Wright Express, net of tax			181				—				69				250
		(131		)		(180		)		276				(35		)
Income from discontinued operations, net of tax			28				1,090				1				1,119
Net income			805				—				277				1,082
As of December 31, 2005
Goodwill (a)			12,026				(9,889	)			51				2,188
Total assets			34,104				338	(c)			51				34,493
Retained Earnings			5,946				—				51				5,997
Total stockholders’ equity			11,291				—				51				11,342

	Separation Plan
	In October 2005, the Company’s Board of Directors approved a plan to separate the Company into four independent, publicly traded companies:

	•	Realogy Corporation—encompasses the Company’s former Realogy segment, which is now presented as a discontinued operation.
	•	Wyndham Worldwide Corporation—encompasses the Company’s former Hospitality Services and Timeshare Resorts segments, which are now presented as discontinued operations.
	•	Travelport—encompasses the Company’s former Travel Distribution Services segment, which is now presented as a discontinued operation.
	•	Avis Budget Group, Inc.—encompasses the Company’s current vehicle rental operations.

On July 31, 2006, the Company completed the spin-offs of Realogy and Wyndham in tax-free distributions of one share each of Realogy and Wyndham common stock for every four and five shares, respectively, of then outstanding Cendant common stock held on July 21, 2006. On August 1, 2006, Realogy and Wyndham stock began regular-way trading on the New York Stock Exchange under the symbols “H” and “WYN,” respectively. Prior to the completion of the spin-offs, Avis Budget received special cash dividends of $2,225 million and $1,360 million from Realogy and Wyndham, respectively, and utilized such proceeds to fund a portion of the repayment of its outstanding debt, as discussed below. On April 24, 2006, the Company announced that in addition to continuing to pursue its original plan to spin-off Travelport to its stockholders, the Company would also evaluate opportunities for the sale of such business. On August 23, 2006, the Company completed the sale of Travelport for net proceeds of approximately $4.1 billion, of which approximately $1.8 billion was used to repay indebtedness of Travelport. Pursuant to the Separation and Distribution Agreement among the separating companies, during third quarter 2006, the Company distributed $1,423 million and $760 million of such proceeds to Realogy and Wyndham, respectively.

During the three and nine months ended September 30, 2006, the Company incurred costs of $480 million and $536 million, respectively, in connection with executing the separation plan. Such costs are as follows:

		Three Months Ended				Nine Months Ended
		September 30, 2006				September 30, 2006
Early extinguishment of corporate debt		$	313			$	313
Stock-based compensation			71				79
Severance and retention			51				65
Insurance			14				14
Asset write-offs			11				19
Legal, accounting and other professional fees			11				34
Other			9				12
		$	480			$	536

	During the three and nine months ended September 30, 2006, the Company also incurred costs within discontinued operations of $183 million and $239 million, respectively, in connection with executing the separation plan. Such costs are primarily related to the accelerated vesting of stock-based compensation awards, severance and retention and professional and consulting fees.
	In addition, pursuant to the Separation Agreement, Realogy, Wyndham and Travelport have agreed to assume and retain all of the liabilities primarily related to each of their respective businesses and operations, including litigation primarily related to each of their businesses where the Company is a named party. Realogy and Wyndham have also agreed to assume certain contingent and other corporate liabilities of the Company or its subsidiaries, incurred prior to the disposition of Travelport (see Note 13—Commitments and Contingencies).
	Prior to the spin-offs of Realogy and Wyndham, the Company entered into a Transition Services Agreement with Realogy, Wyndham and Travelport to provide for an orderly transition following the sale of Travelport and the spin-offs of Realogy and Wyndham. Under the Transition Services Agreement, the Company will provide Realogy, Wyndham and Travelport with various services, including services relating to human resources and employee benefits, payroll, financial systems management, treasury and cash management, accounts payable services, telecommunications services and information technology services.
	Also, in connection with its execution of the separation plan, the Company repaid certain corporate and other debt and entered into new financing arrangements (see Note 11—Long-term Debt and Borrowing Arrangements).
	Changes in Accounting Policies during 2006
	Timeshare Transactions. In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 152, “Accounting for Real Estate Time-Sharing Transactions,” in connection with the previous issuance of the American Institute of Certified Public Accountants’ Statement of Position No. 04-2, “Accounting for Real Estate Time-Sharing Transactions” (“SOP 04-2”). SFAS No. 152 provides guidance on revenue recognition for timeshare transactions, accounting and presentation for the uncollectibility of timeshare contract receivables, accounting for costs of sales of vacation ownership interests and related costs, accounting for operations during holding periods, and other transactions associated with timeshare operations.
	The Company adopted the provisions of SFAS No. 152 effective January 1, 2006, as required, and recorded an after tax charge of $65 million ($0.64 per diluted share) during the nine months ended September 30, 2006 as a cumulative effect of an accounting change, which consists of a pre tax charge of $105 million representing the deferral of revenue and costs associated with sales of vacation ownership interests that were recognized prior to January 1, 2006, the recognition of certain expenses that were previously deferred and an associated tax benefit of $40 million. There is no continuing impact associated with SFAS No. 152 due to the disposition of the Company's former timeshare business in connections with the spin-off of Wyndham.
	Stock-Based Compensation. On January 1, 2003, the Company adopted the fair value method of accounting for stock-based compensation of SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”) and the prospective transition method of SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure.” Accordingly, the Company has recorded stock-based compensation expense for all employee stock awards that were granted or modified subsequent to December 31, 2002.
	In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS No. 123R”), which eliminates the alternative to measure stock-based compensation awards using the intrinsic value approach permitted by APB Opinion No. 25 and by SFAS No. 123. The Company adopted SFAS No. 123R on January 1, 2006, as required, under the modified prospective application method. Because the Company recorded stock-based compensation expense for all

	outstanding employee stock awards prior to the adoption of SFAS No. 123R, the adoption of such standard did not have a significant impact on the Company’s results of operations. However, the Company recorded an after tax credit of $1 million during the nine months ended September 30, 2006 as a cumulative effect of an accounting change, which represents the Company’s estimate of total future forfeitures of stock-based awards outstanding as of January 1, 2006 (see Note 15—Stock-Based Compensation for further information).
	Recently Issued Accounting Pronouncements
	In September 2006, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 108, which provides guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. The Company will apply this guidance for the year ended December 31, 2006 and believes that such adoption will have no impact on the Company’s financial statements.
	In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”). SFAS No. 158 requires an employer to recognize the over-funded or under-funded status of a defined benefit postretirement plan (other than a multi-employer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. SFAS No. 158 also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions. The Company will adopt the provisions of SFAS No. 158 during fourth quarter 2006, as required, and is currently evaluating the impact of such adoption on its financial statements.
	In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”) which defines fair value, establishes a framework for measuring fair value and expands disclosure about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. The Company will adopt SFAS No. 157 on January 1, 2008, as required, and is currently evaluating the impact of such adoption on its financial statements.
	In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which is an interpretation of SFAS No. 109, “Accounting for Income Taxes.” FIN 48 provides measurement and recognition guidance related to accounting for uncertainty in income taxes. FIN 48 also requires increased disclosure with respect to the uncertainty in income taxes. The Company will adopt the provisions of FIN 48 on January 1, 2007, as required, and is currently evaluating the impact of such adoption on its financial statements.
2.	Discontinued Operations
	Summarized statement of operations data for discontinued operations is as follows:
	Three Months Ended September 30, 2006

		Marketing
		Services
		Division (a)				Realogy (b)				Wyndham (b)(c)				Travelport (b)(d)				Total
Net revenues		$	—			$	527			$	336			$	520			$	1,383
Income before income taxes		$	—			$	77			$	88			$	35			$	200
Provision for income taxes			—				31				182				41				254
Income (loss) from discontinued operations, net of tax		$	—			$	46			$	(94	)		$	(6	)		$	(54	)
Loss on disposal of discontinued operations		$	(5	)		$	(60	)		$	(68	)		$	(137	)		$	(270	)
Provision (benefit) for income taxes			31				(19	)			(21	)			373				364
Loss on disposal of discontinued operations, net of tax		$	(36	)		$	(41	)		$	(47	)		$	(510	)		$	(634	)

Three Months Ended September 30, 2005

						Marketing
		Wright				Services
		Express (a)				Division				Realogy				Wyndham				Travelport				Total
Net revenues		$	—			$	341			$	2,068			$	885			$	646			$	3,940
Income before income taxes		$	—			$	66			$	381			$	200			$	108			$	755
Provision for income taxes			—				23				132				68				39				262
Income from discontinued operations, net of tax		$	—			$	43			$	249			$	132			$	69			$	493
Gain on disposal of discontinued operations		$	5			$	—			$	—			$	—			$	—			$	5
Provision for income taxes			2				—				—				—				—				2
Gain on disposal of discontinued operations, net of tax		$	3			$	—			$	—			$	—			$	—			$	3

Nine Months Ended September 30, 2006

						Marketing
		Wright				Services
		Express (a)				Division (b)				Realogy (c)				Wyndham(c)(d)				Travelport (c)(e)				Total
Net revenues		$	—			$	—			$	3,856			$	2,052			$	1,859			$	7,767
Income before income taxes		$	—			$	—			$	445			$	377			$	170			$	992
Provision for income taxes			—				—				172				288				54				514
Income from discontinued operations, net of tax		$	—			$	—			$	273			$	89			$	116			$	478
Gain (loss) on disposal of discontinued operations		$	9			$	(15	)		$	(74	)		$	(83	)		$	(1,463	)		$	(1,626	)
Provision (benefit) for income taxes			3				27				(22	)			(25	)			347				330
Gain (loss) on disposal of discontinued operations, net of tax		$	6			$	(42	)		$	(52	)		$	(58	)		$	(1,810	)		$	(1,956	)

Nine Months Ended September 30, 2005

		Wright								Marketing
		Express (a)				PHH (a)(b)				Services
		(Restated)				(Restated)				Division				Realogy
Net revenues		$	29			$	180			$	1,011			$	5,520
Income (loss) before income taxes		$	(7	)		$	2			$	86			$	885
Provision (benefit) for income taxes			(3	)			25				33				306
Income (loss) from discontinued operations, net of tax		$	(4	)		$	(23	)		$	53			$	579
Gain (loss) on disposal of discontinued operations		$	580			$	(285	)		$	—			$	—
Provision for income taxes			330				—				—				—
Gain (loss) on disposal of discontinued operations, net of tax		$	250			$	(285	)		$	—			$	—

		Wyndham				Travelport				Total
Net revenues		$	2,452			$	1,858			$	11,050
Income before income taxes		$	490			$	266			$	1,722
Provision for income taxes			113				129				603
Income from discontinued operations, net of tax		$	377			$	137			$	1,119
Gain (loss) on disposal of discontinued operations		$	—			$	—			$	295
Provision for income taxes			—				—				330
Gain (loss) on disposal of discontinued operations, net of tax		$	—			$	—			$	(35	)

Summarized balance sheet data as of December 31, 2005 for discontinued operations are as follows:

		Realogy				Wyndham				Travelport				Total
Assets of discontinued operations:
Current assets		$	330			$	917			$	676			$	1,923
Property and equipment, net			321				422				533				1,276
Goodwill			3,163				2,638				4,088				9,889
Other assets			1,647				4,133				1,644				7,424
Total assets of discontinued operations		$	5,461			$	8,110			$	6,941			$	20,512
Liabilities of discontinued operations:
Current liabilities		$	656			$	940			$	860			$	2,456
Other liabilities			809				3,266				732				4,807
Total liabilities of discontinued operations (a)		$	1,465			$	4,206			$	1,592			$	7,263

3.	Earnings Per Share
	The following table sets forth the computation of basic and diluted earnings per share (“EPS”).

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
														2005
		2006				2005				2006				(Restated)
Income (loss) from continuing operations		$	(325	)		$	3			$	(455	)		$	(2	)
Income (loss) from discontinued operations			(54	)			493				478				1,119
Gain (loss) on disposal of discontinued operations			(634	)			3				(1,956	)			(35	)
Cumulative effect of accounting changes			—				—				(64	)			—
Net income (loss)		$	(1,013	)		$	499			$	(1,997	)		$	1,082
Basic weighted average shares outstanding			100.6				103.7				100.5				104.7
Stock options, warrants and restricted stock units (*)			0.6				2.0				0.8				2.2
Diluted weighted average shares outstanding			101.2				105.7				101.3				106.9
Earnings per share:
Basic
Income (loss) from continuing operations		$	(3.23	)		$	0.03			$	(4.53	)		$	(0.02	)
Income (loss) from discontinued operations			(0.54	)			4.75				4.76				10.69
Gain (loss) on disposal of discontinued operations			(6.30	)			0.03				(19.48	)			(0.34	)
Cumulative effect of accounting changes			—				—				(0.63	)			—
Net income (loss)		$	(10.07	)		$	4.81			$	(19.88	)		$	10.33
Diluted
Income (loss) from continuing operations		$	(3.23	)		$	0.03			$	(4.53	)		$	(0.02	)
Income (loss) from discontinued operations			(0.54	)			4.66				4.76				10.69
Gain (loss) on disposal of discontinued operations			(6.30	)			0.03				(19.48	)			(0.34	)
Cumulative effect of accounting changes			—				—				(0.63	)			—
Net income (loss)		$	(10.07	)		$	4.72			$	(19.88	)		$	10.33

4.	Acquisitions
	Assets acquired and liabilities assumed in business combinations were recorded on the Company’s Consolidated Condensed Balance Sheets as of the respective acquisition dates based upon their estimated fair values at such dates. The results of operations of businesses acquired by the Company have been included in the Company’s Consolidated Condensed Statements of Operations since their respective dates of acquisition. The excess of the purchase price over the estimated fair values of the underlying assets acquired and liabilities assumed was allocated to goodwill. In certain circumstances, the allocations of the excess purchase price are based upon preliminary estimates and assumptions. Accordingly, the allocations may be subject to revision when the Company receives final information, including appraisals and other analyses. Any revisions to the fair values, which may be significant, will be recorded by the Company as further adjustments to the purchase price allocations. The Company is also in the process of integrating the operations of its acquired businesses and expects to incur costs relating to such integrations. These costs may result from integrating operating systems, relocating employees, closing facilities, reducing duplicative efforts and exiting and consolidating other activities. These costs will be recorded as adjustments to the purchase price or as expenses, as appropriate.